You don’t hear about China’s “ghost cities” nearly as much anymore. Around 2012, thereabouts, suddenly social and regular media alike were alive with pics of all sorts of empty buildings all around the vast urban Chinese landscapes. Unlike America’s Rust Belt, these spectral landmarks were brand new; built recently yet eerily unoccupied. Claimed to be a symbol of burgeoning asset bubbles, more importantly, these have always been more fundamental than all that.

I wrote about the ghosts more than four years ago in the thick of what was to be “globally synchronized growth”, putting them down as a sort of quasi-anecdotal measure of that very thing.

The term “ghost city” is a loaded one, often deployed to skew toward a particular viewpoint. In the context of China’s economy, it has become shorthand for perhaps the largest asset bubble in human history. While that may ultimately be the case, in truth China’s ghost cities aren’t about the past but its future.

The Communists “had” to build all these “ghost” megalopolises in advance of the immense demographic and industrialization migrations then still sweeping the country (and the rest of the world from the opposite direction; thus, Rust Belt). As tens then hundreds of millions moved from subsistence agriculture to factory work, the latter done alongside these glittering towers of modernity, the throngs of newly middle-class China needed places to live, move, recreate, etc., ready to go before they began to arrive.

Taking a page out of the 1989 baseball movie Field of Dreams, the motto was: you better build it because they are coming.

In other words, the ghost cities were ghostly only for a short while. In boomtimes China, they filled up quickly and as they did the government’s growth targets moved on to building the next batch of them. Like a conveyor belt, the entire country was transformed by first by public investments in these fixed assets that private investments then finished up.

Answering the “puzzle” about them, ghost cities didn’t so much disappear over the decade since they first showed up, rather the previously built versions filled up, and then the need for more just kind of dissipated.

The grand motto, therefore, swung into reverse, becoming – as China’s increasingly authoritarian Communist dictatorship intends – Field of (broken) Dreams: if you don’t stop building, Xi will come.

In raw economic terms, in the accounting sense, this transition plainly visible in what the Chinese call Fixed Asset Investment, or FAI.

The one half (or slightly less than half) is what various local/municipal governments around China contribute to this deep structural economic “progress.” This is the FAI derived and put through by State-owned Enterprises (FAI). But it is not now, nor was it ever, specifically about meeting the needs of ghost cities trying to meet the needs of Deng Xiaoping’s 1991 promise (nanxun).

Administratively, until October 2017’s 19th Communist Party Congress immortalized this shift, local governments used FAI of SOE’s to achieve their quantitative economic targets. Sure, it led to quite a bit of waste (particularly in the first few years following the Great “Recession”), yet a means to an end that was believed a problem only in timing rather than purpose.

Even if governments used official FAI to boost contemporary economic results in order to meet numerical targets, it was still expected that once China’s roaring economy roared back to full such efforts wouldn’t end up wasted merely idle for a little bit longer than had been typical. This the 2009-12 vintage of ghost.

If, however, you no longer expect the economy to roar in any direction, back or forward, or if you do but the top government echelon commands you rethink every such thought, relieved of quantitative growth targets lower-level officials might then only commit to what true fundamental demand there might be for what’s “real” in China’s economy.

In fact, under this post-19th “quality” growth remand, on the contrary you are now more likely to risk eliciting Xi’s direct gaze and running afoul of his supercharged internal police squad (“corruption”) should you do any little bit more than necessary.

As 2018 had been loaded with economic weakness yet excused by “trade wars” or any number of benign-sounding apologies, those had all (intentionally, to boost a global inflation narrative) ignored these quite naked political and economic undercurrents, so, too, will 2021 and beyond end up perplexed by the same only now in the form of the global pandemic’s nature ironically begun in this very nation.

Pay no attention to these awful economic numbers, we’re already told, that’s just delta or lambda, probably omega once our forced perceptions – and the coronavirus – inevitably mutate all the way to the end of the alphabet. It’s a disease, alright, but quite clearly one of thinking and worldview first.

Beginning with FAI, of the SOE variety, China’s National Bureau of Statistics (NBS) released figures late last night (EDT) which don’t really leave much for alternate interpretations. This is not about the last few months, and “outbreaks”, instead a much longer trend that encapsulates and helpfully illustrates everything I wrote above.

First, the basic numbers: accumulated total FAI, both private and public (SOE), for the January to July 2021 period increased by just 10.3% when compared to the January to July 2020 period; this works out on a 2-year basis to barely better than 4% per.

That accumulated rate of 10.3% was down from 12.6% in the January to June period. You don’t normally see a more than two percentage point change this late into an accumulated year – unless there was a big monthly change (blamed, of course, on COVID; more on that in a minute).

The estimates provided by the NBS are incomplete, and not just for FAI. The Chinese government supplies some basic tallies and in terms of FAI these are merely the accumulated (year-to-date) growth rates and totals in RMB. Revisions abound as does the patent malpractice (in a statistical sense) of changing the sampling panel as the NBS sees fit. Therefore, the monthly estimates two charts above are those calculated by our own eyes – using what account values are available – and may not exactly jive with the government’s numbers.

Even if we aren’t perfectly accurate right down to the renminbi, it doesn’t matter; State-owned FAI lays bare both China’s predicament as well as the government’s indifference to it. Or, more specifically, official indifference insofar as the plain disfavoring of ghost cities. There aren’t as many nowadays because China is no longer growing like it once had, nor does the government expect it to.

The rest of the Chinese data, retail sales, and industrial production, merely more evidence to the official directive. IP was up just 6.4% year-over-year in July, meaning output was up only 11.5% from July 2019; leaving a downright ugly 2-year compounded change of 5.6%. Blamed, again, on the pandemic.

The biggest miss, and of the greatest concern, if only because it verifies the negative SOE FAI, Chinese retail sales rose only 8.5% year-over-year during last month. Well below expectations, this yields a 2-year compounded change (annual rate) of 3.6% at the lower end of what has already been a truly stunning bout of ongoing, continuous ill-health.

Once more blamed on COVID, there is instead a much more valuable and robust correlation with other factors, related factors (especially relating inside China to outside China via eurodollars), that long ago took the form of a very different kind of disease.

A monetary, global one:

To most people, even those in China, these numbers make little or no sense other than if sorted for them by the mainstream introduction of pandemic expectations. The Chinese economy is absolutely strong, inflationary strong, everyone says. If it’s not – and too often it is not – in the latest monthly numbers, then there is always the latest monthly excuse handy. And if that doesn’t cut it, then, we are told, surely the government will come running to the rescue.

But chain those numbers together and produce an actually accurate picture of China’s real condition and the pandemic, like trade wars, show that it has little or nothing to do with the overall situation beyond making what’s already bad just a bit worse.

To that, Xi has no further use whatsoever for ghost cities.